China Promotes Accelerated Development of the Service Outsourcing Industry

On 16 January 2015, the State Council outlined its plans for the development of the PRC service outsourcing industry.1 The Opinions marked the first attempt by the State Council to formulate a comprehensive plan to accelerate the growth of the industry and increase its competitiveness within the international market by 2020. Other objectives for the service outsourcing industry set out in the Opinions include the developing of outsourcing cluster regions, the nurturing of middle and senior management, multi-specialists and individuals with an international perspective, and an increase in the recruitment of university graduates in the next three years.

Some of the key initiatives in the Opinions are:

Targeted development – focusing on the development of high-technology and high value-added service outsourcing to facilitate an upward movement along the industry value chain; starting from January 2015, a catalogue of areas of focus will be published regularly to better direct investment in particular sectors; developing financial service outsourcing actively and encouraging the outsourcing of non-core operations by financial institutions;

Blueprint for development – drafting the Thirteenth Five-Year Plan in respect of the service outsourcing industry with clear areas of focus, objectives and safeguards; including into the Thirteenth Five-Year Plan innovations in technological, management and business models, and the development of associated infrastructure in outsourcing clusters in respect of education resources, the Internet of Things (IoT), big data, cloud computing, mobile internet and other new technologies;

Enhanced financial support – revising the policy on use of Treasury funds to support the international outsourcing industry; directing capital from society to increase its investment in international service outsourcing corporates through the setting up of industry funds for the international outsourcing industry and other market channels;

Tax benefits – for service corporates with advanced technologies, expanding the geographic and sector scope of the preferential enterprise income tax of 15% and the tax deductible for employee education expenses (up to 8% of total salaries); increasing the number of model cities for PRC service outsourcing gradually from 21 to 31;2 implementing zero value-added tax and tax exemption for international service outsourcing; and

Building legal business environment – revising the legal framework for service outsourcing operations and defining the scope of their business activities; strengthening the enforcement and supervisory power in relation to intellectual property rights, patents and trademarks.

References: Opinions on Promoting Accelerated Development of Service Outsourcing Industry《国务院关于促进服务外包产业加快发展的意见》 (the "Opinions")

Issuing Authority: The State Council of the People’s Republic of China (the "State Council")

1 Service outsourcing means the outsourcing of non-core businesses by corporates to external service providers.
2 The existing 21 model cities are Beijing, Tianjin, Shanghai, Chongqing, Dalian, Shenzhen, Guangzhou, Wuhan, Harbin, Chengdu, Nanjing, Xi'an, Jinan, Hangzhou, Hefei, Nanchang, Changsha, Daqing, Suzhou, Wuxi and Xiamen.